New guy old question

[Robert Ford]

I am getting ready to relocate for a new job. The good news is, I'm looking at a 25K annual increse in salary, the bad news is, I need to sell my house. I owe about 83K on the first mortgage and have a second with a balance of 33k that I had to take out for repairs that were not covered by insurance (termites, garage roof and kitchen).

Agents in the area are telling me I should be able to get 100-105K out of the house, but to break even, I need to get 116K. I have about 6500 in cash. I'm thinking of borrowing 26k out of my TSP account, using that and the 6500 to pay off the second to get "upside right" and then applying what ever i make off the sale, above the first, toward paying off the TSP loan.

My rate on the first is 5.325 and 11 on the second (crummy....I know ) I can "borrow" from TSP at 3.00% and pay it off in 4 years without applying the profit off the sale.

The TSP account has been flat for almost a year even with 400 a month going into it.

Tell me why I'm crazy!

[Like2Plan]

Robert Ford,
Nope, I would not borrow to get right side up....
Your new buyers will know exactly what you owe on your home both 1st and 2nd mortgages--and they are going to be in the driver's seat. You are most likely going to have to pitch in some money to be able to close. I think the danger with that 2nd mortgage gone, the buyers are going to think they have more room to maneuver with their offer. (But, maybe you are really motivated to sell?)
I'd wait and see exactly what you are going to need to go to settlement and then only borrow what you need to close.
(And, I would use a zero % interest for 12 month CC offer--before I would go for a TSP loan)

[disneysteve]

our new buyers will know exactly what you owe on your home both 1st and 2nd mortgages

How would a potential buyer know this? Is the balance on my mortgage public information? If it is, I wasn't aware of that. When we bought our house, I don't recall ever seeing any information about if the seller had a mortgage or how much it was for.

[Like2Plan]

How would a potential buyer know this? Is the balance on my mortgage public information? If it is, I wasn't aware of that. When we bought our house, I don't recall ever seeing any information about if the seller had a mortgage or how much it was for.

Yes-- it was data provided to us by the real estate agent.

It would also be information material to the sale because the new owners can not get clear title to the property until the mortgages have been satisfied....

[Robert Ford]

I know the original sale price is public, but the amount remaining on a mortgage?

This is my second house and I've never been given that information...

[Like2Plan]

I know the original sale price is public, but the amount remaining on a mortgage?

This is my second house and I've never been given that information...

Perhaps it is different from state to state. (Maybe it was information my real estate agent volunteered because her clients wanted that information passed along...)

[swanson719]

If you have to relocate for your job, I would assume you have a deadline the house has to be sold by. That being the case, you're probably going to want to lower the price enough to get a quick sale. You don't want to go below 91K because your 25K raise for the first year would go to just break even on the home sale, not to mention your moving expenses and tax increases.

As far as covering the difference, with a short sale, the bank won't clear the title without working out a payment plan or getting a lump sum. I would call the lender and see if they can do a payment plan at a lower interest rate than your TSP. It's never good to rob from your retirement accounts. I would almost advise taking out a personal loan at a higher interest rate than borrowing from retirement accounts. That's me personally, and I doubt many would agree with it from a math perspective. I personally think credit card companies are the scum of the earth, so I would shy away from a 0% offer as well. From a money saving point, the TSP is probably the best bet, but I get a nauseous feeling when it comes to withdrawing from retirement accounts.

[JourneyCC]

Keep your cash!!!!!!!!

Do not take from your TSP account! (trust someone who learned this the hard way!)

Do you have to sell? Can you rent it for what the mortgage payment is? I think you should try and sell it for at least 3-4 months while you are at your new job and see what offers you get. Just my 2 cents.

[JourneyCC]

Oh and I'm not 100% on this, but most retirement accounts via employers have rules that stipulate a "loan" becomes a "withdrawal" if not paid in full within 30-60 days if you leave the employer where the account is held. Major taxation issues! Just food for thought.

[Robert Ford]

Thanks for all the replies.

I'm still sitting on the fence with this, mostly because when I do move, I want to be done with this place 100% and the small hit I may take by borrowing like this can be offset by larger contributions in the future. I guess it's a piece of mind thing with me, not wanting to leave any baggage behind.

Oh yeah...I just found out my heat exchanger is cracked and I need to install a new furnace!!!

[wincrasher]

I'm with the others, don't borrow until you have a closing.

The loans you have on the property are not disclosed unless you want them to be. I closed on a house this spring and didn't know how much the mortgage was on it from the seller until the actual closing. If I had known the amount, I would have made a lower offer

You may want to investigate if you can deduct a loss if you sell below what you owe. There may be a little tax break to offset your loss.